WASHINGTON (Reuters) – US retail sales fell unexpectedly in February, the latest sign that economic growth slowed with a $ 1.5 trillion boost in tax cuts and increased government spending.
FILE PHOTO: People shop at the Macy's department store in New York, USA, March 11, 2019. REUTERS / Brendan McDermid / Photo Archive
The Commerce Department said on Monday that retail sales fell 0.2 percent, with households cutting purchases of furniture, clothing, food and electronics and appliances, as well as construction materials and gardening equipment. January data was revised upward to show that retail sales increased 0.7% instead of 0.2%, as previously reported.
Economists polled by Reuters predicted that retail sales would rise 0.3 percent in February. Retail sales in February were up 2.2% from a year ago.
The surprise fall in sales in February may reflect, in part, delays in processing tax refunds in the middle of the month. Tax refunds were also lower on average compared to previous years after reformulation of the tax code in January 2018. Cold and wet weather could also have hampered sales.
The retail sales report for February was delayed by a partial 35-day shutdown of the federal government that ended Jan. 25. The March retail sales report, due for release on April 16, will be released on April 18.
Excluding automobiles, gasoline, construction materials and food services, retail sales fell 0.2 percent in February after a revised 1.7 percent increase in January. These so-called major retail sales correspond more closely to the consumer spending component of gross domestic product.
They were previously reported to have regained 1.1 percent in January. Consumer spending accounts for more than two-thirds of economic activity.
The strong upward revision of top retail sales in January was insufficient to reverse the December drop, leaving expectations for warm GDP growth unchanged in the first quarter. The report has joined a number of other data, including housing starts and industrial production.
Growth estimates for the January-March quarter are as low as an annualized rate of 0.8%. The economy grew 2.2% in the fourth quarter, after expanding 3.4% in the period from July to September.
The loss of momentum is being driven by declining fiscal momentum, high interest rates, slowing global growth, Washington's trade war with China and uncertainty over Britain's exit from the European Union.
In February, sales of building materials and equipment retailers and garden supplies plummeted 4.4%, the biggest drop since April 2012. Clothing stores fell 0.4% and furniture stores fell 0.5%.
Sales at food and beverage stores fell 1.2 percent, the biggest drop since February 2009. Revenues from electronics and home appliance stores fell 1.3 percent, the biggest drop since May 2017.
But consumers bought more vehicles and spent more at service stations, probably reflecting higher gasoline prices.
Online and mail order retail sales increased 0.9%. Sales in restaurants and bars rose 0.1% and spending on hobby, musical instruments and bookshops increased by 0.5%.